Exploring economic and financial instability within global markets and economies.

Tuesday, April 3, 2012

Auerback & Wray: America Needs Healthcare, Not Health Insurance

“Private health insurance is not synonymous with healthcare. There is a big difference between levying a tax for a public good (i.e. healthcare) versus forcing people to buy a service from a private health insurance company, which is by no means synonymous with healthcare.”Read it at EconomonitorAmerica Needs Healthcare, Not Health InsuranceBy Mashall Auerback & L. Randall WrayLeading up to and following testimonies before the Supreme Court on the constitutionality of the individual mandate I read numerous articles from an array of sources. There appear to be legitimate arguments about why the law either does or does not violate the commerce clause. Both sides are also probably correct in noting that the decision is likely to be influenced by political preferences amongst the individual judges. (This is normal since the judges, similar to any individual, cannot divorce their judgments entirely from subjective values on which their reasoning and logic are ultimately based.) Trying to predict the outcome at this point, while attention provoking, is unlikely to offer much beneficial knowledge.However, a related subject matter that I believe adds value to the discussion is regarding the important difference between healthcare and health insurance that Marshall Auerback and L. Randall Wray illuminate. A large majority of my friends and family are Democrats whom overwhelmingly support the idea of universal healthcare. For many of them it is immoral to deny an individual access to healthcare for varying reasons including age, sex and medical history. The Patient Protection and Affordable Care Act (PPACA), including the individual mandate, is therefore a significant achievement in the direction of universal healthcare. During several recent conversations regarding the individual mandate, a frequent retort has been that forcing individuals to purchase a public good, healthcare, is not unconstitutional. Had the individual mandate been phrased as a tax with revenues used by the government to provide healthcare, I doubt there would have been grounds to overturn that portion of the law. Unfortunately, for those who support the PPACA, the actual law requires something entirely different from the example just mentioned.The individual mandate, as written, requires that private individuals spend their own funds to purchase a specific private good, health insurance. Decisions regarding coverage, reimbursement and cost still largely remain with the private insurers that have their own mandate to maximize profits for shareholders. One can argue that our health care system’s reliance on a private insurance market is an immovable, impediment to universal healthcare, but this does not alter the constitutionality of the law. It’s conceivable to envision a similar mandate in reference to the auto industry and auto insurance. Owners’ of a vehicle are currently required, by law, to purchase auto insurance although the cost varies greatly and policies can be denied to individuals. Individuals that elect not to get insurance, for whatever reason, may impose costs on others in various ways including using public transportation. From a cost-benefit and equal rights perspective, it may therefore be reasonable to mandate that all individuals purchase private auto insurance.The issue that I foresee, is that this same line of reasoning could easily be extended to other forms of insurance including life, home/renters, flood, tornado, etc. This policy need not stop at insurance either. A recent 60 minutes video, featuring Dr. Sanjay Gupta, discusses new research on the toxic effects of sugar. Forcing consumers to purchase some percentage of privately supplied food that excludes sugar may very well improve society’s health and save costs in the long-run, but it faces a similar constitutional dilemma.Several months will likely pass before a decision is made regarding the individual mandate and its knock-on effects on the rest of PPACA. When discussing this issue it’s important to remember that there is a significant difference between healthcare and health insurance. For those on the left, do not despair, Auerback and Wray think an opposition ruling may open the door for something better. I suggest reading their entire article for a better explanation of this distinction and a possible look into the future of healthcare after the individual mandate.

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